The Sunday TimesBusiness

28th April 1996




Air traffic boom in Asia

Air traffic growth in the Indian subcontinental region within the next twenty years is projected to be the highest in the world after the People's Republic of China, a leading aircraft manufacturer has said.

To accommodate this growth, operators in India, Pakistan, Bangladesh and Sri Lanka are expected to purchase over 400 airliners between now and the year 2014, Airbus Industry International Relations Officer, David Vellupillai said in Colombo last week.

Of the 406 new aircraft forecast to be purchased, 116 will be replacements. Airbus Industry hoped to capture a substantial portion of the estimated US 30bn market, Mr. Vellupillai said.

Already Airlanka, Air India, Indian Airlines and Pakistan International Airlines were flying over 70 aircraft with Indian Airlines alone flying 40 Airbuses.

Last week Airbus had also announced the setting up of a permanent office in India.

Airbus market forecasts said world air traffic will grow by 5.1 per cent each year within the next two decades led by mainland China (8.8 per cent) and South Asia (7 per cent). Traffic in the Middle East is forecast to grow at 6.1 per cent a year and in Europe 4.9 per cent.

The Toulouse based Airbus Industry is a consortium between Aerospatiale of France (37.9 per cent), Daimler Benz Aerospace Airbus of Germany (37.9 per cent), British Aerospace of Britain (20 per cent) and CASA of Spain (4.2 per cent).

Since the first Airbus became operational in 1974, Airbus says 1,385 aircraft had been delivered and over 600 more aircraft are on order. In 1995, Airbus had sold more aircraft than the industry leader Boeing, for the first time since its formation, Mr. Vellupillai said.

Brighter side of recent power cuts

By Asiff Hussein

Importers of electricity generators have recorded sharp increases in sales since the power cuts began on March 24.

Mano de Silva, Director, Engineering, Hayleys, a leading importer of Diesel generators said they had sold as many generators in February and March as they had sold during the previous ten months, and that demand was going to exceed supply shortly.

An official at Koolair Ltd., said there had been a 100 per cent increase in sales during the last four months as compared with sales recorded during a similar period last year. As many as 60 generators ranging from 1.4 KVA to 1000 KVA (ie., both domestic and industrial generators) had been sold during this period.

Many other firms such as Singer and Jinasena Ltd., recorded a significant increase in sales.

The Government offered a duty waiver on the import of large industrial generators shortly after the power cuts began on March 24. Duty on the import of all categories of generators stands at 10 per cent.

The Ceylon Electricity Board (CEB) agreed to reimburse duties for generators above 100 KVA on orders where L/CS been opened upto March 31, a ministry spokesman said.

However, a leading businessman criticized the concessions as a shortsighted measure that did not take into consideration the long-term national interest.

"The Government has obviously taken an ill-considered decision of offering duty waivers to each and every importer who was considering the import of generators to meet the demand. It ignored the fact that there were large numbers of generators ex-stock, for which duty had been paid. As a result of this shortsighted move there could be a severe drain on our foreign exchange, considering that the lowest price for an industrial generator (ie., 40 KVA upwards) is Rs. 675,000," he said.

"If the Government wished to give an incentive to industrialists to purchase generators, the obvious answer would have been to offer a duty rebate to suppliers so that they could pass on the benefit to their customers, as well as arrange an easy payment loan scheme via state banks to entrepreneurs who are considering the purchase of such generators".

"It should be borne in mind, that most of our entrepreneurs are small and medium-scale industrialists who just cannot afford to invest such a large sum."

"Further", he said "import means delay. The shipment of an industrial generator from a reputable source such as Britain or Japan would take 2-3 months, so that it would not be worthwhile for a customer to make use of the waiver."

"The Government's lack of a contingency plan is reprehensible, considering that rain patterns in the third quarter of last year had given every indication of a severe drought. If the CEB had reacted as expected of them, a great many problems faced by industrialists and consumers in general could have been easily avoided at this stage," he added.

Ceylinco Shriram tie-up launches new financial product

By Asantha Sirimanne

While the local equity market limped forward lackadaisically the second new fixed income financial product in as many months, promising returns in excess of 20 per cent per year was launched last week.

Ceylinco Shriram Capital Management Services Company Ltd, a 60/40 joint venture between the Ceylinco group of companies in Sri Lanka and the Shriram Group in India have launched a portfolio management product in the wake of the Vanik debenture issue.

"We saw a similar situation in India in the mid - 1980's when the India equity markets were depressed", Shriram Group Managing Director, D.A. Gadgil said in Colombo.

Mr. Gadgil said they were forced to adapt global financial products to suit the Indian socialist restrictions and were now geared to combat any pitfalls they might encounter. "We've made most of the mistakes that can be made", he said. He added that the newly formed alliance could derive the full benefits of their prior experience. "Though we will transfer our knowledge we will not make the mistake of actually managing any funds in Sri Lanka. That is best left to the locals".

Ceylinco Shriram offers portfolio management services with a 20 per cent guaranteed return. The company also guarantees the capital investments will only be made in bank guaranteed corporate paper. At present the company offers two products, Money mine and Money mine Plus, with the latter offering better upside in case of favourable interest rate movements. The minimum investment is Rs. 100,000 which has to be locked up for a minimum of one year and a maximum of five.

Funds placed with the company at present will receive 20 per cent this year but rates may be adjusted from time to time.

Ceylinco Shriram, General Manager, Hiran de Silva said the company will invest and actively trade in the money markets to derive the high returns.

In the Money mine scheme for example 45 per cent of the funds will be invested in Treasury Bills. "If we think rates will go down we will raise funds via repurchase agreements (repos) and go into Treasury Bills," Mr. De Silva explained. The company will then liquidate the position and realize a capital gain.

Alternately it may raise funds via the inter-bank market or repos which will be used to take positions in commercial paper or asset backed securities.

Under the Money mine scheme 20 per cent of the funds will be invested in the interbank market, 15 per cent in commercial paper, 15 per cent in asset backed securities and 5 per cent in call money accounts. In the Money mine Plus scheme only 25 per cent will be invested in Treasury Bills while 30 per cent will be in asset backed securities and 30 per cent in money market investments.

Up to last week the company had collected Rs. 33mn. It hopes to reach the break even Rs.100mn mark in the near future. Mr. De Silva said Ceylinco Shriram also hoped to introduce equity linked schemes at a later date. Ceylinco Shriram also hoped to structure asset backed securities.

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